Monday, May 11, 2009


I just read this news item:

NYT--"Goldman Sachs agreed to pay up to $60 million to settle complaints in Massachusetts about the investment bank’s role in the subprime mortgage business, state officials said Monday.

Goldman has long insisted they were a minor player in the mortgage-backed business, relative to rivals like Bear Stearns and Lehman Brothers."

This shortly following last week's resignation by Stephen Friedman from his position as Chairman of the NY Fed, owing to blatant conflicts stemming from his Goldman directorship and inappropriate purchase of Goldman shares as the Fed was busy deliberating over the Wall Street bailout.

I've been thinking (yes once in a while I think about things other than parody lyrics). Maybe Lloyd Blankfein is absolutely right. The current CEO of Goldman Sachs keeps insisting that the vaunted "Goldman model" remains sound, despite the fact that Goldman was forced to convert to a lowly Bank Holding Company in a leverage dry post bailout world.

Most of us think of the Goldman model as some combination of global market foresight, raw capital, flawless trading execution, with a heavy dependence on cheap capital and leverage.

Wrong, wrong, wrong! The Goldman model can be succinctly stated as follows: Pull every lowdown scam everybody else does, execute it flawlessly, but don't get caught!

This is the model Goldman executes flawlessly. Next time you read about the shadow Goldman bailout, Goldman's innocence from sub-prime culpability Goldman's fool proof AIG hedge, or Goldman's sanctimonious outrage when it comes to any implication that its relationship's with alumnis like Friedman and Paulsen, just remember the Goldman model as I have framed it.

I repeat: Pull every lowdown scam everybody else does, execute it flawlessly, but don't get caught!

This will go a long way to explaining everything.

There you have it:

The Good (JP Morgan?), the Bad (Bear Stearns and Lehman!) and the Goldman.

Blankfein is 100% correct, the Goldman model still works.


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